Foreign investment in the United States should be encouraged. If you believe in free markets and the idea that foreign cash flowing into the United States is a good thing, then you understand that protectionism and nativist tendencies to oppose foreign investment in the American economy is short sighted. Yet, politicians seem to be falling all over themselves to create an atmosphere where foreign investment will go to other nations creating foreign jobs and wealth.
Take the case of the Japanese company Nippon Steel agreeing to invest $15 billion in U.S. Steel. That proposed deal is in danger of being blocked because nationalist politicians of both parties have chosen to demagogue the issue. Reuters reported on February 5, 20024, “for Japan, the biggest foreign investor in the U.S., a collapse of the deal could give companies pause about acquisitions in other strategic sectors and force them to be more risk averse when sizing up deals, say former officials, lawyers, analysts and executives.” In other words, if the purchase of the worlds’ fourth-largest steelmaker is blocked, expect the idea of friendshoring, “a term coined by U.S. officials to describe deeper economic cooperation between allies” to fall by the wayside hurting economic growth. Politicians attempt to tank the deal will be harmful for an American economy already facing headwinds thanks to these same politicians’ proclivity for spending money they don’t have and bad economic policy.
It is ironic that the same politicians who racked up $2 trillion in debt in one year are telling the private sector how to run a smooth economy. Protectionism has not worked to revitalize the American economy. What has helped is the resurgence of consumer spending and domestic manufacturing. Politicians attempts to scare away new investment in American innovation and manufacturing will lead to economic isolationism and stagnation. Japan is an ally and if we scare away entrepreneurs from a close ally like Japan, wealthy individuals and corporations from less loyal allies will invest elsewhere. There is no economic theory that promotes the idea of scaring away foreign investment to grow the economy.
It is important to note that Nippon Steel is a publicly traded company that is not an entity of the Japanese government. There should not be any concern that the Japanese government will benefit from this transaction, because it is a company controlled and owned by shareholders. Any implication that a foreign government will control the operations of U.S. Steel is not based in fact. Nor should there be any national security concern that a foreign power is in control of the production of American steel. The nativist concerns should be discarded if our nation is serious about growing an economy that encourages foreign investment.
Also, this is not an unprecedented investment. This company already has eight steel mill facilities in the U.S. This investment has proven to expand the production of steel domestically at a time when much manufacturing has been outsourced to China and other nations with lower labor costs. This acquisitions only controversial, because politicians, and unions, are using the issue to create some bad headlines for Nippon.
The steel industry in America has had better days. This investment opportunity will help to keep more steel production domestically at a time when steel is in high demand thanks to an explosion in the manufacture of electric vehicle (EV) motors. Many of these EVs are sold to Americans and should be manufactured with domestically produced steel. This opportunity provided by Nippon Steel will allow American workers to manufacture more domestic steel to meet the increasing world demand.
Any of the concerns about a name change are here should be no concern because it will remain U.S. Steel and continue to be based Pittsburgh, PA. Union workers should be supportive because the company already has a good relationship with the United Steelworkers (USW) and Nippon has promised to keep in place current benefits and compensation packages.
This transaction makes economic sense because it will forward the goal of strengthening domestically produced steel and will keep jobs here. As a national security issue, supply chain issues will be removed, and automobile manufacturers will be able to cut down on the cost of transporting steel to plants.
Free markets, free trade and inviting foreign investment are three qualities of a healthy economy. Politicians, and self-interested union officials, may oppose this deal for selfish reasons, yet they have no economic theory to stand on. This deal should be allowed to go to completion and will end up helping to expand an American economy in dire need of some good news.
